Executive Summary - Water Sub-Metering in Manufactured Home Communities

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OREGON’S 2011 SUBMETERING LAW
BY
PHILLIP C. QUERIN, LEGAL COUNSEL MANUFACTURED HOUSING COMMUNITIES OF OREGON (MHCO)

EXECUTIVE SUMMARY

A manufactured housing community under Oregon law is one in which the resident owns and occupies the manufactured dwelling and rents the underlying space. If four or more such spaces are situated within 500 feet of each other1, it becomes subject to regulation under Oregon’s manufactured housing law, which is primarily found in ORS 90.505 et. seq.

Senate Bill 2942, which became law on June 23, 2011, was introduced by the Manufactured Housing Landlord/Tenant Coalition, which consists of community residents, park and marina owners, manufacturers, affordable housing nonprofits, submetering companies, and Oregon’s Manufactured Communities Resource Center.

Background. Historically, park owners recovered the cost of providing water [including wastewater and storm water] in one of following three ways:

o By including it in the base rent charged to all residents, aka the “base rent” method.
o By billing it to the residents separately from rent, based upon master meter readings. The calculation is normally arrived at by allocating the total charges on a per space basis, aka

the proratamethod.
o By billing it to the residents separately from rent, based upon submeters placed on each

space.3

When water was cheap in years past, its cost was normally recovered in the landlord’s base rent. However, with rising costs and conservation concerns, both landlords and residents began to explore methods of monitoring usage, so that the cost could be spread among residents more equitably. The natural consequence of individual accountability for water usage was increased conservation, which benefited both landlords and residents hence the growing trend toward submetering.

Senate Bill 929. In 2009, the Coalition submitted, and the Oregon Legislature passed SB 929, which required communities of 200+ spaces to convert to water submetering by December 31, 2012.4 Communities on well water were not permitted to separately charge residents based upon a master meter, i.e. pro ratamethod.5

1 ORS 446.003(23)
2 This bill dealt primarily with park submetering and conversion of parks into subdivisions. This White Paper deals only with submetering.
3 Since submeters only monitor water usage at the individual spaces, community common area usage is normally allocated to residents on a pro-rata basis from mater meter readings.
4 This mandatory requirement applied only to landlords using the master meter method where the cost was prorated among all residents. It did not apply to communities where the cost of water was included in the base rent.
5 ORS 90.532 (7)

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Senate Bill 294. With its passage on June 23, 2011, SB 294 now permits an exception to SB 929’s mandatory submetering requirement for 200+ space communities that use the master meter/pro rata billing method. It requires pro rata billing method sometimes referred to as “super conservation”.6 It is important to note that SB 294 does not eliminate the mandatory conversion to submeters for 200+ space communities if they are on the master meter/pro rata billing method and do not adopt the “super conservation” rules.

SB 294 now permits all landlords who install submeters, to impose a special assessment on residents to recover for the for the cost of installation.

DETAILED DISCUSSION OF SENATE BILL 294

o General Information:

  •   Mandatory submetering for communities of 200+ spaces only applies if they

    currently use the master meter/pro rata billing method pursuant to ORS 90.532 (1)

    (b) (C) (ii).

  •   Manufactured housing communities will no longer be permitted to convert from

    the “base rent” method of water cost recovery to a pro rata method under ORS

    90.532 (3).

  •   The December 31, 2012 deadline imposed for 200+ space communities by SB

    929 is continued.

  •   For communities on well water:

    •   They may not convert from a base rent method of recovery to a prorata method; and

    •   They are specifically exempted from mandatory submetering, regardless of the number of spaces.

o Super Conservation Rules [For communities using the master meter recovery method. Effective after December 31, 2012]:

  •   They must bill for water using the pro rata billing method by apportioning the utility provider’s charge to residents on a pro rata basis, with only the following factors being considered:

    •   The number of residents or occupants in the manufactured dwelling compared with the number of residents or occupants in the manufactured dwelling park [basing two-thirds (2/3) of the charge to the residents on this factor]; and

    •   The size of a resident’s space as a percentage of the total area of the manufactured dwelling park [basing one-third (1/3) of the charge on this factor].

  •   The number of residents and/or occupants in each dwelling unit and in the community must be determined at least annually. 7

    6 This was an informal term used by the Coalition for ease of reference it was not used in any pejorative sense. Its use will be continued in this White Paper.
    7 Legislative history testimony of John VanLandingham, of the Lane County Legal Aid & advocacy Center, to the House Committee on General Government and Consumer Protection, May 26, 2011: “The landlord cannot use the simple per-space pro rata allocation formula. The theory is that those tenants with more occupants should pay

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  •   Requires adoption of other conservation measures:

    •   Annual testing of pipes and appliance for leaks at no charge to residents;

      results are to be made available to them; applies to common areas as well.

    •   Residents are required to permit access under ORS 90.725, if necessary

      for landlord to conduct test.

    •   Landlord is required to repair any significant leaks in common areas.

    •   Landlord may require that residents repair any significant leaks found

      inside their dwellings within a “reasonable time”.8

    •   Landlord are required to repair leaks in pipes located on resident’s space

      that connect to the dwelling.9

    •   Resident’s failure to repair a significant leak after request may be evicted

      following two written notices - one to make the repair and the other to

      comply with the notice of termination provisions of ORS 90.630.10

  •   A resident adversely affected by a landlord’s noncompliance with the mandatory submetering law [or the super conservation exceptions] may sue to enforce

    compliance and recover damages.

    o Caveats11:

  •   Super conservation only applies to landlords covered by SB 929, i.e. 200+ space

    communities using the master meter/prorata billing method.

  •   Small communities under 200 spaces may not test a resident’s dwelling unit for

    water leaks.

  •   Super conservation methods do not apply to marinas.

  •   Although these provisions deal with billing residents for water usage, since most

    municipalities charge for wastewater and storm water based upon water usage, SB

    294 applies to these charges as well.

  •   ORS 90.510 (4) (b) governs the landlord’s right to unilaterally amend a rental

    agreement [i.e. without resident consent]. This statute is amended by SB 294 to expressly permit landlords to convert to the super conservation pro rata billing method via unilateral amendment of the residents’ rental agreement.

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more, on the assumption that more occupants consume more water, and on the additional assumption that those tenants with larger spaces are likely to use more water for watering lawns or plants. This is not as fair as individual submeters, but it is fairer than everyone paying the same no matter what. The proportion-of-residents-in-the- dwelling concept already exists as an allowable billing method in ORS 90.534 (2) (c) (B).”

8 Note: This follows the same approach as found in the repair and deterioration statute, ORS 90.632(7), which specifically itemizes timing considerations such as weather and other conditions outside of a resident’s control.
9 Note: This is an obligation that did not previously exist in the pre-SB 294 version of ORS 90.730, which describes landlord obligations to residents.

10JVL Legislative History: “This could be a harsh result, but the alternative is allowing water to be wasted, driving up costs for everyone in the park, not just the tenant with the leak.]
11 JVL Legislative History: “The coalition views the significant changes in existing law here -- regarding leaks and testing, for example -- as an experiment, limited to the SB 929 parks; the coalition will monitor how this experiment works, for possible future tweaking or expansion.”

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o Changes to ORS 90.532 [Billing methods for utility or service charges; system maintenance; restriction on charging for water]

  •   Allows pro rata billing for water for new residents if the rest of the park is already using pro rata billing. 12

  •   Note: New prorata billing arrangements have been continuously prohibited since 2009 by SB 772, even with mutual landlord-resident agreement.

  •   Applies to new rental agreements and mutually amended rental agreements entered into on or after January 1, 2010.

  •   New communities, or those expanding over 200 spaces, may only use submetering for water.

  •   Allows landlords to use electronic mail [“e-mail”] to bill residents monthly for any utility or service charges that are billed separate from rent if permitted by the rental agreement. [Note: Landlord may not unilaterally amend rental agreement to do so. It must be consensual.]

o Changes to ORS 90.536 [Charges for utilities or services measured by submeter]13

  •   Corrects an error in current law that permitted billing for stormwater based upon water use as measured by a submeter. However, only wastewater is normally

    billed by utility companies in this manner.14 Now, the landlord may only bill for:

    •   The cost of any sewer service for wastewater as a percentage of the resident’s water charge as measured by a submeter, if the utility or service provider charges the landlord for sewer service as a percentage of water

      provided; or,

    •   A pro rata portion of the cost of sewer service for storm water and

      wastewater if the utility or service provider does not charge the landlord

      for sewer service as a percentage of water provided.

  •   Permits landlords to add a pro rata charge for common areas.

  •   Landlords will be allowed to include the cost of a third party billing service for

    reading the meters and handling the billing process. [Note: This is limited to water submetering and super conservation billing methods only.]

o Changes to ORS 90.537 [Conversion of billing method for utility or service charges]15

  •   The amount of base rent reduction required upon submeter conversion may not be less than an amount reasonably comparable to the amount of the rent previously allocated to the utility or service cost averaged over at least the preceding one year. [Previously, it was six months.]

  •   Previously, landlords were prohibited from directly assessing residents for the

    12 JVL Legislative History: “The rationale is that it would be inefficient to submeter a few spaces with new tenants or to use the [base] rent recovery method for a few new tenants when the rest of the park already uses pro rata billing.”
    13 See, ORS 90.534 for charges based upon the pro rata billing method.

    14 Note: ORS 90.315 was changed to distinguish between stormwater and wastewater in order to be consistent with the 2011 changes to ORS 90.536.
    15 Note: This statute is not limited to water submetering.

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cost of submeter installation. This has now been changed.16

  •   As an option only, a landlord may levy an assessment for actual post-

    installation [not anticipated pre-installation] cost, with resident repayment spread over not less than 60 months - to be included with the utility or service charge.17 The installation cost may include related capital costs, e.g. upgrading water lines required to handle higher water pressure.

  •   Note: This right of assessment is limited to manufactured housing communities, not marinas; it may be any size park; and it can be used for any utility installation, not only water.

    Miscellaneous:

  •   Landlords converting to submeters may unilaterally switch to the pro rata

    billing method for common areas. [However, this change should be

    included in the landlord’s initial 180-day notice of intent to submeter.]

  •   If the landlord continues to recover water charges for common areas from base rent, he/she may offset against the rent reduction an amount reflecting the cost of serving the common areas. If the utility or service provider cannot provide the landlord with an accurate cost for the service to the common areas, the landlord “...shall assume the cost of serving the common areas to be 20 percent of the total cost billed.” [Note: This offset is not available if the landlord chooses to bill for the common area water using the pro rata method.]

o Changes to ORS 90.730 [Landlord duty to maintain rented space, vacant spaces and common areas in habitable condition]

Expands the habitability requirements for common areas as follows: “If supplied or required to be supplied by the landlord to a common area, a water supply system, sewage disposal system or system for disposing of storm water, ground water and subsurface water approved under applicable law at the time of installation and maintained in good working order to the extent that the system can be controlled by the landlord.

o Changes to ORS 446.062 [Rules regulating parks; state building code requirements; approval for new construction or additional lots]

For anticipated cost savings, allows for installation of community submeters to be treated as “...a minor plumbing installation*** performed under a statewide permit and inspection system for minor construction work....”

16 JVL Legislative History: This change reflects our new understanding that submeter installation may be significantly more expensive ($250 to $800 per meter) than we thought in 2005 ($50 per meter). At an average installation cost of $500, the cost to install submeters in a 200 space park would be $100,000. Given current problems securing private market financing for anything, and the lack of any public financing, the coalition worried about how landlords would pay for installation. Landlords could, of course, raise the rent to cover the cost (though current law requires a six month waiting period), but tenants generally fear that rent increases never go down -- meaning that a landlord who raised the rent to cover the cost of submeter installation would not lower the rent after the installation was paid for. And current law prohibits including the cost of installation in a utility or service charge; ORS 90.536 (3).

17 Query: May the cost recovery be carried over to a new resident if the existing resident sells and/or removes the home? In fairness, it would seem so.

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